This year the Commonwealth of Pennsylvania is joining a number of other states in the U.S. that have already defined economic nexus for its sales tax as it applies to online sellers. Sales tax nexus was first defined in the U.S. Supreme Court case Quill v. North Dakota, which ruled that retailers must have some kind of physical presence in a state before that state can require retailers to collect sales tax from buyers. The precedent set by Quill was overturned by South Dakota v. Wayfair in 2018. Now, sales tax nexus includes not only physical presence such as inventory or a retail location but also an "economic" connection to a state.
The Supreme Court ruling on Wayfair, when interpreted along with Pennsylvania's Tax Reform Code, creates an economic nexus for online sellers who sell products in the state. As of this year, Pennsylvania's sales tax nexus has been broadened to include businesses making at least $100,000 in annual gross sales in the state. All online sellers who have this economic nexus must now register, collect and remit Pennsylvania sales tax beginning July 1, 2019.
The sales threshold for these sellers--in this case, annual gross sales of at least $100,000--is determined by calendar year. The collection period from July 1, 2019 through March 31, 2020 uses Calendar Year 2018 to determine nexus. For Calendar Year 2019, the collection period is April 1, 2020 to March 31, 2021. Subsequent years will use the collection period from April 1 to March 31. There is no transaction volume to consider in Pennsylvania.Online sellers who have greater than $10,000 but less than $100,000 in taxable sales in Pennsylvania will not be affected by the state's new definition of economic nexus but will still be required to either 1) register, collect and remit Pennsylvania sales tax or 2) comply with new notice and reporting requirements.